Senator Tom Cotton is introducing legislation to increase oversight of charitable donations passed through intermediary organizations to other entities. The bill would require these intermediaries, known as "fiscal sponsors," To disclose where donations are directed and would impose tax penalties on those failing to conduct proper oversight of recipient organizations.
Under current law, tax-exempt charities can forward tax-deductible donations to unregistered groups without the same regulatory requirements. Cotton stated that "far-left terrorist organizations shouldn't be able to manipulate our tax code for their advantage," And said his bill would "require public disclosure of these activities, tax the charities that don't control where their money is spent and end tax write-offs for donors who bankroll these unchecked arrangements."
Cotton contended the existing law "allows far-left radical groups, like the Palestinian Youth Movement, to manipulate the U.S. tax code." Critics have also noted that tax-exempt donations have been passed to other groups designated as terror-linked by U.S. Sanctions authorities.
The proposed Fiscal Sponsorship Transparency Act would require disclosure of fiscal sponsorship arrangements on tax forms, impose excise taxes on improper conduit arrangements, and eliminate charitable deductions for such contributions. Representative Lloyd Smucker is sponsoring companion legislation in the House.